Fuel Prices Spike Again; Seen as Threat

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Fuel Prices Spike Again; Seen As Threat NEW YORK (Reuters) - U.S. gasoline futures continued their rise on Friday, as leading economic officials said high gasoline prices this summer may hinder the nation's economic recovery.

Gasoline futures in New York gained 1.32 cents per gallon at $1.0843 per gallon on the New York Mercantile Exchange on Friday, bringing them to levels 5.3 percent higher than two days ago and 20 percent higher than they were a year ago.

Last June, U.S. gasoline prices reached record levels at the pump, and they are now already higher than they were in early May of 2000. But it remains to be seen whether last year's record price at the pump will be topped this year.

But that is exactly what U.S. Energy Secretary Spencer Abraham warned of on Thursday, citing pump prices, as tracked by his federal agency, already 13 percent higher than at this time last year.

The national average price rose at the pump for regular unleaded gasoline to $1.63 a gallon, according to the government's latest weekly survey -- 21 cents above year-ago levels and well above the $1.52 a gallon peak the department had forecast would be reached this year.

The spike has put gasoline prices -- as well as prices for other energy commodities like electricity or natural gas -- at ground zero in the battle to keep the U.S. economy out of recession. Indeed, Federal Reserve officials have pinpointed energy prices as a possible impediment to a quick recovery for the sluggish U.S. economy.

Regarding gasoline prices, Alfred Broaddus, the President of the Richmond Federal Reserve Bank, said higher pump prices are a ``very visible'' indicator of the economy for consumers, and can put a damper on already declining levels of consumer confidence.

U.S. crude prices are supported by the high gasoline prices, but were relatively stable on Friday and for the week.

June futures for West Texas Intermediate crude, the U.S. oil benchmark, were down 9 cents to $28.36 on the NYMEX.

U.S. crude prices ended the week 9 cents higher, a move of a mere 0.3 percent.

WHAT GOES UP MUST COME DOWN

But some analysts, including Adam Sieminski of Deutsche Banc Alex Brown, say gasoline prices will fall.

``The gasoline high prices will stick around for a little bit longer but they won't get worse,'' Sieminski said Friday. ''July 4th is usually the peak of the gasoline season, and my guess is that pump prices will be lower on the Fourth of July than they are now.''

Gasoline supplies are still slim, but with U.S. refineries operating at almost 99 percent of capacity according to the U.S. Department of Energy and gasoline profit margins high, production will continue to increase, Sieminski said. He also said that the higher U.S. prices will attract a flood of imported gasoline to overcome shortfalls.

Still, operational glitches at U.S. refineries could propel gasoline prices higher.

In London on Friday, the European benchmark crude North Sea Brent gained 12 cents to $28.19 per barrel on the International Petroleum Exchange (IPE). The IPE will be closed on Monday for a British bank holiday.

But New York Mercantile Exchange will be open on Monday.

Personal Notes: Is anybody else amazed and shocked at 5.3% higher than two days ago?

"But it remains to be seen whether last year's record price at the pump will be topped this year." Is this guy a moron or what? Is there any doubt that it will top last years prices? Refineries are crashing and burning all over the world!!!

"Regarding gasoline prices, Alfred Broaddus, the President of the Richmond Federal Reserve Bank, said higher pump prices are a ``very visible'' indicator of the economy for consumers, and can put a damper on already declining levels of consumer confidence."

It doesn't take an overpaid Fed Reserve Bank President to tell us the obvious when you can get the same info for free here at Grassroots months before the Feds words make the news.



-- Guy Daley (guydaley1@netzero.net), May 05, 2001


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